Florida May Be Headed To A Recession After Latest Tax Estimates
Heading into a critical election year, Florida legislators may have to tighten spending because of a combination of a slowing economy and reverberations of financial decisions.
State economists on Wednesday drew up new estimates that predict the state will take in about $867 million less in revenue over two years than earlier anticipated. The new forecast was drawn up on the same day that the stock market tanked amid worries that a recession could be looming.
Amy Baker, head of the Legislature’s Office of Economic and Demographic Research, didn’t go that far in predicting a recession but warned of signs that the state economy is slowing.
“In my mind, I think of it as winded,” Baker said. “If you’re on a marathon, and you’ve been on it for a very long time, those last few miles, you’re starting to get winded. I think that’s where we think the economy is. It’s moving into a slowing of growth.”
Economists meet periodically during the year to draw up forecasts of how much general revenue --- the main building block for Florida’s nearly $91 billion budget --- is expected to come into state accounts. The new forecast approved by economists trimmed estimated revenue by $451.6 million in the current fiscal year, which began July 1 and will be in effect until June 30.
The economists also agreed to reduce estimated revenue for the 2020-2021 fiscal year by $416.1 million.
The estimates came as the Dow Jones Industrial Average dropped by 800 points Wednesday and as the economy is expected to play a key role in the 2020 presidential election.
But the reduced state tax estimates also took into account other factors.
One big issue is a decision by the Seminole Tribe of Florida to quit sharing money from its casino operations with the state after legislators and Gov. Ron DeSantis were unable to reach a new gambling agreement. The tribe made its last payment to the state in March.
The end of the deal with the tribe resulted in a drop of $346.7 million for the current fiscal year.
The vast majority of Florida’s general-revenue funds come from sales tax dollars. But they aren’t the only source. Corporate income taxes also flow into the general revenue fund as do taxes on insurance premiums, beverage and liquor licenses, real estate transactions, and corporate filing fees, among other things.
The amount of sales taxes is a good indicator of the state’s economic health, while general revenue plays a critical role in funding education, health and prison programs.
Economists meet regularly over the summer to develop financial projections for the current fiscal year and to develop forecasts for the coming years. The financial estimates are used by the governor’s office when developing a legislative budget request. The estimates also are used by lawmakers as they negotiate a new budget.
The FY 2019-2020 budget is comprised of more than $34 billion in general revenue. The majority of those funds are spent in two budget areas: education and health care. More than $17.5 billion in general revenue is targeted toward education, from kindergarten through college, and $10.2 billion in general revenue is spent in five state agencies that offer health care and social service programs.